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Mortgage Closing Rate Drops from Record High

mixed-numbersDespite a slight easing in credit standards, the percentage of loan applications closed in July slipped to a three-month low, Ellie Mae reported Wednesday in its monthly Origination Insight Report.

Tracking loan applications initiated 90 days prior, the company calculated an overall closing rate of 57.7 percent last month, down from 60.7 percent in June and 57.8 percent in May.

The decline came as home purchase applications expanded to take up a larger piece of the market. According to Ellie Mae, the share of closed purchase loans rose to 67 percent in July, the highest percentage since the company began tracking in August 2011.

Despite an increase in market share, actual purchase application volumes still looked weak through the month. Numbers released by the Mortgage Bankers Association (MBA) show purchase applications dropped 3.6 percent month-over-month in July, and they remain down 11 percent compared to last year, according to the group's latest weekly measure.

The decrease came despite a dip in mortgage rates, according to Ellie Mae's data. The company recorded an average 30-year rate of 4.39 percent for all loans, down from 4.42 percent in June.

With apps on the decline, the time it took to close a loan in July was an average 37 days, the lowest on record in Ellie Mae's survey.

"This reflects time to close decreasing across the board, with an average of 36 days for conventional loans and 38 days for [Federal Housing Administration] and [Veterans Affairs] loans," said Jonathan Corr, president and COO of Ellie Mae.

Meanwhile, credit standards on closed loans shifted down just slightly, with the average FICO score slipping to 727 after a four-month upward trend. The average loan-to-value ratio (LTV) was unchanged for the seventh straight month at 82 percent.

For denied loans, the average FICO was up three points to 689, while the average LTV was down to 81 percent.

"A further sign of easing: 32 percent of closed loans had an average FICO score under 700 last month compared to 25 percent in July 2013," Corr said.

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.
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